Pressure gathers for and against China tariffs bill

Sen. Charles Schumer (D-N.Y.) is in China this week on his first overseas congressional delegation, or codel, and business lobbyists are hoping that a change of scenery changes his mind on his trade sanctions bill.

Schumer and Sen. Lindsey Graham (R-S.C.) have parlayed their bid for a steep new tariff on imported Chinese goods into political leverage since the bill won support in a Senate test vote a year ago. But while Schumer and Graham have met with high-ranking Bush administration officials, Beijing’s initial steps to loosen its artificially depressed currency, the yuan, have had little impact on the massive U.S.-China trade deficit.

Next week brings Schumer and Graham’s latest deadline for an up-or-down vote on their bill, barring another postponement if the senators see progress during this week’s trip. Many lobbyists are concerned that lawmakers’ election-year eagerness to protect U.S. businesses and workers could lead Congress to endorse tariffs.

“China is everyone’s favorite whipping boy right now, and there is nothing members of Congress like more than taking a whack at the Chinese,” said Erik Autor, vice president of the National Retail Federation. “All these efforts to hit Chinese imports don’t really reflect a nuanced or careful consideration of policy options. It’s just being driven by politics.”

Lobbyists tend to unite against the Schumer-Graham bill, which would levy a 27.5 percent tariff on all Chinese imports if the yuan is not revalued after 180 days of trade talks. But lobbyists do agree with the senators that the current policy is not working. Imports from China account for nearly a quarter of the record $723 billion U.S. trade deficit, and the Chinese have made sluggish progress in cracking down on widespread intellectual-property violations.

Yet, in the words of U.S.-China Business Council Vice President Erin Ennis, the two nations “are interdependent.”

“It’s not in anyone’s interest for China to cut us off” from its flow of foreign investment and exports, Ennis said. “It’s not in anyone’s interest for China to consider cutting us off. We have a huge, dynamic economy that requires a huge amount of capacity to keep going.”

After hearing of the senators’ codel, Ennis’s group volunteered to help set up meetings with Chinese government officials, including the commerce minister, foreign minister and central-bank governor. Ennis said her members’ goal is to give Schumer, Graham and traveling partner Sen. Tom Coburn (R-Okla.) a realistic picture of Chinese efforts at economic modernization.

“Everyone’s hope is that they’ll feel when they get back that they have learned enough to delay the vote again,” Ennis said.

But K Street cannot be sure that the two senators, both known for their independent-minded deal-making, will agree to wait longer on their bill, which won 67 votes as an amendment to last year’s State Department authorization. Graham said he was confident that Senate leadership would agree to hold a vote by March 31 if he and Schumer pressed for one, though he acknowledged that few in the business world support their proposal.

“It depends on what business you’re in,” Graham said. “If you’re losing business to China because of currency manipulation, you want us to do it yesterday.”

Schumer spokesman Israel Klein declined to lift lobbyists’ spirits by entertaining a delay of the March 31 deadline, saying that Schumer and Graham would decide how to respond when they return.

“The more time passes, the more upset people are getting on this issue, and he’s pretty optimistic that this bill will pass,” Klein said. “Schumer would rather not have the need for the bill. He’d rather China just move on their own.”

The U.S. Chamber of Commerce is flexing its lobbying muscles before Chinese President Hu Jintao’s visit to Washington next month, which will coincide with a meeting of the Bush administration’s Joint Committee on Commerce and Taxation. Jeremy Waterman, the Chamber’s director for northeast Asia, highlighted intellectual-property compliance and further currency movement as topping the group’s wish list — not the Schumer-Graham bill.

“I don’t need to explain to you that this is an election year, and there are some very legitimate issues out there,” Waterman said. Still, he added, “the Chamber doesn’t hold the position that unilateral measures that would, in fact, legitimize Chinese retaliation against U.S. exporters is the right way to go.”

The National Association of Manufacturers has faced internal divisions during its deliberations over Chinese currency policy, with some members supporting a bill from Reps. Duncan Hunter (R-Calif.) and Tim Ryan (D-Ohio) that would impose countervailing tariffs on the yuan. NAM Vice President Frank Vargo said the group would convene a special policy meeting to decide its next move in June if China continues to drag its feet.

In the meantime, Vargo echoed the hope that Schumer and Graham’s visit achieves tangible results without a vote on their bill.

“Ultimately, Congress cannot legislate the Chinese currency, and we don’t want to see across-the-board tariffs thrown up that would throw the entire global trading system into a tizzy,” Vargo said.

Aside from Hu’s visit, lobbyists are watching another expected April arrival — the Treasury Department’s biannual report on the monetary policies of U.S. allies. The report’s last edition, in November, pointedly refrained from tagging China as a currency manipulator despite administration officials’ vows to talk tough.